Resourcing Efficiencies – Part 2
Outside of an organization’s core competencies, on-demand services can add tremendous value to an organization’s operations. The perception that on-demand, external services are more expensive, or less cost-efficient, than internal resources, is based on assumptions that, when examined closely, do not hold up. The actual cost and inherent inefficiencies associated with maintaining internal capacity are vastly underestimated, a fact that will be demonstrated in detail.
There are three core issues with analyzing the true cost of internal capacity are examined; the actual costs of employees, inefficiencies due to multitasking, and the inability to react to changes in demand. These three factors are often misunderstood and, as a result, underestimated when calculating the cost efficiency of an organization’s output. Below we outline our thoughts on multi-tasking and the impact it has on efficiency.
We will continue our discussion on the next factor, inability to respond to shifts in demand, in our next insight piece in May.
Multi-tasking: A Multi-faceted Drain on Resources
New staff members are often at pains to ensure that they are multi-taskers, comfortable wearing many hats. Employers have, in kind, come to value this trait and explicitly base roles around a number of contesting responsibilities. Intuitively this is a cost-effective approach, paying one employee for two, three, or four skill sets. However, wearing multiple hats means those hats have to be changed regularly and the impact this has on efficiency is often overlooked.
Attempting to manage multiple projects and complete a number of tasks simultaneously has become an admirable approach to working today. However, such an approach has an impact on output. These impacts are often described as switching costs. Jumping back and forth between two different tasks involves switch costs that decrease efficiency and slow down effective levels of output in both tasks. Some estimate that 20% of a worker’s time is spent on making that adjustment when switching between tasks. That time expenditure increases at a constant rate with the more tasks you add. Switching in between three tasks will lead to an outlay of 40% of the worker’s time (1). Therefore, asking an employee to, say, spend some of their time assisting with creating marketing materials when their core duty is inside sales will reduce the quality of output in both areas and take longer to complete than if one task was focused on. In this example, 20% of that worker’s time, or 1.6 hours during a typical day, is wasted, but if three of their colleagues are placed in the same position that is 6.4 hours of wasted time in a day, or 32 hours wasted in a week. That is, undoubtedly, an unsustainable expenditure of resources.
Running a multifunctional team of multitaskers will require additional oversight in order to ensure each team member is prioritizing their duties correctly and delivering them in a sequence which enables their colleagues to do the same. The time spent on these meetings will, then, stack up and become a real cost to the business. An article in Management Issues (2) usefully and succinctly explains the costs of meetings in dollar amounts. They base their model on a one hour, five attendee meeting, where the average yearly salary for each attended is $50,000. The hourly cost, and the ancillary costs associated with running a meeting, means that the total cost reaches somewhere in the region of $600 on each occasion. Now, most organizations will hold one such meeting per week, in order to assign tasks and check progress on previous tasks assigned. That means that the annual total of these will amount to approximately $31,200, or $6,240 per employee. There will, of course, be additional meetings with individual team members to focus on particular areas or projects. We can see then that the cost of running a small team will soon equal the total salary of one of those team members. Add to this that 50% of the time spent on meetings leads to no positive results whatsoever (3) and internal meetings become a needless drain on resources, undermining severely the advantages an internal team of multi-taskers may bring.
3. Dead Time
When using an internal team of multi-taskers to meet all of your operational needs you will face a common problem – dead time. This can arise from a number of workplace (mis)practices. Research carried out by Global Workplace Analytics estimates that workplace distractions cost global employers approximately $600 billion. Similarly, unscheduled absences cost employers an average of $1,800 per employee per year.8 These are two most common and, therefore, most costly efficiency issues faced by employers, but many others can arise and take hold within an organization’s culture.
In total, the additional costs accrued due to running a business on a multitasking model could run to around 50% of each employees’ annual salary, depending upon the extent to which the negative effects of multitasking are felt. This is a needless expenditure, and truly undermines the perceived wisdom that spreading internal employees’ capacity across multiple areas is a more efficient model to follow.
Click here to see all of our past articles and our exploration of on-demand services will continue next month!
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